Barman Robbie Dale fired the part-timers into a 2-0 half-time lead against their Championship opponents, sparking jubilant scenes at Croft Park.
However, Birmingham emerged for the second half with renewed vigour, and a 52nd-minute drilled strike from Lee Novak gave the home fans cause for concern.
Their worst fears were realised as Birmingham turned the game on its head before the hour mark - Wes Thomas netting twice to save manager Gary Rowett's blushes.
The result denied Blyth just a second appearance in the fourth round of the FA Cup in their 116-year history.
Another Championship club breathing a sigh of relief are Derby County, who required a stoppage-time Chris Martin penalty to see off non-League Southport at Pride Park.
Despite dominating possession and chances, Steve McClaren's men had failed to find a way past their visitors from the Conference, for whom David Raya Martin made a string of excellent saves, but earned a late reprieve when Luke Foster fouled Johnny Russell in the box.
The biggest upsets of the day came as Rochdale and Preston North End eliminated Nottingham Forest and Norwich City respectively.
While East Midlands rivals Derby benefited from a late spot-kick, Forest were left ruing conceding one in the 12th minute of their third-round clash - Peter Vincenti firing home following Michail Antonio's indiscretion to earn a 1-0 win for Rochdale.
At Deepdale, meanwhile, two late goals from Paul Gallagher gave Preston a 2-0 win over Norwich.
Millwall and Bradford shared six goals and face a replay to determine who will progress to the next round, while Wolves' visit to Fulham and Doncaster Rovers' home clash with Bristol City also ended all square.
Leonardo Ulloa scored the only goal as Leicester City claimed a 1-0 win in their all-Premier League tie at home to managerless Newcastle United, and there were thumping wins for the two other top-flight sides in action on Saturday.
West Brom, who were under the leadership of Tony Pulis for the first time, faced early resistence from Conference side Gateshead, but raced to a 7-0 triumph after Saido Berahino opened the floodgates in the 42nd minute - the first of four goals for the young striker.
Swansea City, meanwhile, picked up a comfortable 6-2 win at Tranmere Rovers.
Elsewhere, there were away victories for Middlesbrough, Brighton and Hove Albion, Blackburn Rovers, Reading and Bournemouth at Barnsley, Brentford, Charlton Athletic, Huddersfield Town and Rotherham United respectively.
Bolton Wanderers and Cambridge United complete the list of Saturday's winners after progressing past Wigan Athletic and Luton Town.
